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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
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Experience:  15years with H & R Block. Divisional leader, Instructor
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I am inheriting some money from a distant relative in the US

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I am inheriting some money from a distant relative in the US which is a US citizen and a US resident. I am not a US citizen and not a US resident. The inheritance is cash payouts from an Annuity certificate. Are there any taxes due in the US that I have to consider? Or any filings for that matter?

Robin D :

Hello and thank you for using Just Answer,
For US tax purposes, if you inherited the Annuity, the administrator of the Annuity will be required to withhold tax before making the distribution to you. In the US when someone inherits and account, their tax liability would be the same as the person they inherited the account from.

Annuities are a tax-deferred investment which means that taxes are due when funds are taken out of one. Therefore taxes will be due if a person inherits all of the money in one or takes all of the funds out.
As you are a Non US person, withholding would be required before the distribution of the funds.
You would not have any additional taxes to pay as the withholding would cover the obligation.

I recieved from the administrator a form " Beneficiary tax information & withholding statement" that require me to either select; "I elect not to have federal income tax withheld" or "I elect to have _____% federal income tax withheld". So my understanding is then that this then only applies to the amount that is paied after the adinistrator has dissolved the annuity. If this then is the case do I have to withhold any fraderal income tax when I am not liable to pay income tax in the US?

Robin D :

If you are the beneficiary, the annuity administartor is required to withhold because you are a Non US person. I am surprised that the withholding statement was sent as opposed to a W8BEN.

The election to be exempt from income tax withholding does not apply to any periodic or nonperiodic payment delivered outside the United States or its possessions to a U.S. citizen or resident alien. Refer to Form W-4P for more information.

A nonresident alien can elect exemption from withholding only if he or she certifies to the payer that he or she is not (1) a U.S. citizen or resident alien or (2) an individual to whom Internal Revenue Code section 877 applies (concerning expatriation to avoid tax). The certification must be made in a statement to the payer under penalties of perjury. However, nonresident aliens who choose such exemption will be subject to withholding under Internal Revenue Code section 1441. In the absence of a treaty exemption, they must withhold at the statutory rate of 30% on the entire distribution that is from sources within the United States.
The tax treaty between Norway and the US under Article 18 states:

(2) Alimony and annuities paid to an individual who is a resident of one of the Contracting

States shall be taxable only in that Contracting State.

Robin D :

You can cite the tax treaty article and as you are resident in Norway claim exemption from tax.


OK, thanks.

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